Separate Bank Account for Rental Property Image

Do I need accounting software for my real estate investments?

Real estate investors -just like every business owner- need to track their income and expenses so that they can accurately file taxes and maximize their profits. The stakes are real: inaccurate books can lead to overpaying taxes and making decisions based on flawed data. 

Most small business owners use some form of accounting software to help them categorize transactions, monitor cash flows, and stay in control of their finances.

Real estate investors nationwide choose different strategies to help them manage their financial records.  Those with very small portfolios often do it themselves with spreadsheets.  Those with very large portfolios may outsource the job entirely or employ a bookkeeper on staff.  Investment property owners of all sizes also turn to accounting software to help them stay in control and maximize efficiency. 

This article is to help you figure out if using accounting software is the right fit for you and your real estate portfolio.

Accounting software has serious benefits

First, let’s take a look at some of the advantages that using generic small business accounting software can bring to your real estate investments.

  • Time savings

One of the core benefits accounting software of all kinds offers is the ability to link to your real estate business bank account and import a transaction feed.  It is a safe and secure way to drastically reduce the amount of manual data entry you need to do, saving you lots of time.

  • Increased accuracy

Beyond efficiency, working off an imported transaction feed also increases the accuracy of your books because you are much more likely to account for all of your transactions and expenses.  If you are not claiming all expenses, you are likely overpaying taxes.

  • Organized, cloud-based receipt storage

Accounting software provides a framework that helps you keep your data organized, accessible, and easily communicable.  In addition, almost all modern accounting software is cloud based and allows you to link and store digital copies of receipts.  Not having to physically keep your receipts or use a separate system to manage them helps keep your financial management simple. 

Real estate investment accounting software provides even more value

As you can see, general small business accounting software can be a very useful tool.  Accounting software made specifically for real estate and rentals, such as REI Hub, can be even more beneficial. 

Most accounting tools available today are built with a one-size-fits-all philosophy.  That makes sense for traditional small businesses like retail, but can present problems for unique industries like real estate.  While most accounting softwares can be tweaked to work with investment property, it is not always seamless. Dedicated real estate accounting software is designed to optimize your experience and provide industry specific value.  Benefits include:

  • Already set up for real estate and rentals

Real estate accounting software is ready to go for rentals and investment properties out of the box.  You don't need to change the chart of accounts, figure out how to track by property, or navigate endless accounting jargon.  Instead, you can simply add your properties (and call them properties!), add your accounts, and get on with keeping your books. 

  • Easy to use and optimized for your needs

Real estate accounting software won't help you track inventory or manage payroll, but it will properly split your mortgage payment and print Schedule E reports.  With a property centric interface and rental transaction templates, real estate bookkeeping software is easier to use and understand, especially for real estate investors without much accounting experience. 

  • Integrated rental organizational tools

In addition to storing receipts, real estate investing oriented software includes organizational features specifically geared for the industry.  Every real estate investor needs to keep track of leases, contact information, and key documents.  Maintaining those records in the same location as your financials saves time and ensures that you always have access to relevant information when you need it.

What you risk without software

If you choose not to utilize accounting software, you are at greater risk of the following: 

  • Spending more time with less peace of mind

A solid accounting and bookkeeping system of SOME kind is essential if you want to do your books efficiently and with confidence.  Without a system, how can you be sure you have included all of your expenses?  Without a framework, how much longer and how much harder will it be to file your taxes or gather information for your CPA?
  • Inaccurate books, which could mean paying too much tax

Without a reliable system such as using a dedicated business bank account linked to accounting software, you are at a greater risk of failing to include all of the expenses you incurred.  That leads to over-reporting income and ultimately paying more taxes.  

  • Making decisions based on incomplete data

Incomplete data from inaccurate books can lead to misunderstanding your portfolio's performance and its impact on your net worth. You could also be stuck making big decisions without a true picture of your current situation.    

So, do you need accounting software for your real estate portfolio?

You probably need accounting software if: 

If you fit in one of the following groups, odds are that accounting software would streamline your real estate financial management and make your life easier.

  • You are unhappy with your current bookkeeping

Fundamentally, everything comes down to having a reliable system that helps you work efficiently and maintain accurate records.  If you are frustrated or unhappy with your current system for keeping your investment property books, it's likely time for a change. 
  • You intend to scale quickly

Some real estate investors want to grow slow and steady, others want to grow as fast as possible.  The quicker you want to scale, the more important it is that you have laid a solid foundation and implemented tools and processes that will enable you to easily handle your eventual higher volume.

  • You want to spend as little time as possible on bookkeeping

Accounting software lets you securely connect to your bank account and import a transaction feed- meaning you do not need to a) remember every rental expense you have incurred and b) you do not need to manually enter that expense somewhere.  Less to worry about and less time spent on your books is a win for most investors!

You probably do NOT need accounting software if: 

If the following descriptions fit, you may not need accounting software. 

  • You pay someone else to do it

For some, professional bookkeepers are worth their fees and more for the peace of mind and time savings they provide.  If your real estate portfolio has reached a size and success level that you are comfortable with the expense, congratulations! That bookkeeper will now use some form of accounting software on your behalf. 

  • You are organized and have a relatively small portfolio 

Small, long term rental portfolios with relatively few total transactions are the easiest type to manage manually.  A spreadsheet and document storage can suffice IF you remain diligent and organized.
  • You already have a defined system that you understand and is working efficiently for you

But would you be here reading this article if that was the case?

Last updated: September 2020

 Learn more about REI Hub


Understand why REI Hub is the best accounting solution for your rentals

Go Home

Product Features

REI Hub was built from the ground up for rental property accounting- see how!

View Features

Compare to QuickBooks

See how REI Hub and QuickBooks stack up for rental property accounting.

See Comparison